Question

What are the advantages for a company of listing its shares on the stock exchange? What are the disadvantages?

Answer 1

The first advantage of listing shares on the stock exchange is that the company is able to raise a huge amount of capital. The Other advantage is public visibility because of the publicity generated by the company. It may also be used by venture capitalists as an exit strategy to cash in on successful companies.

The disadvantages of listing shares on the stock exchange are as follows

The company has to follow added disclosure norms for investors and are regulated by the securities and exchange Commission which have strict regulations.

The cost of complying with regulatory requirements can be very high especially for smaller companies which may not be able to sustain the high cost.

Public companies have a high amount of market pressure which may lead management to use questionable practices for boosting earnings.